GM, Chrysler Restructure with Layoffs, Plant Closures

Detroit

DETROIT-Tuesday, General Motors and Chrysler submitted the first part of their plan for viability to the federal government. The companies requested an additional $14 billion to bail them out of their financial crisis and vowed to cut jobs and close plants.

GM’s plan involves the elimination of 47,000 additional jobs, from its current worldwide workforce of 244,000. Roughly, 21,000 US employees will lose their jobs in this round of layoffs. Between 2000 and 2008, GM shuttered 12 manufacturing facilities in the US. It has plans to close an additional 14 plants, which is five more than it planned to eliminated in December. When the closures complete by 2012, GM will own 33 North American plants. It is uncertain at this time which plants will be closing.

Additionally, GM plans to re-shape its dealer network with fewer and better located dealerships. From 2004 to 2008 dealerships declined from 7,367 to 6,246, a 15% reduction. Current plans will accelerate dealership reduction by an additional 25%. This will mean decreasing the total number of US dealerships from 6,246 to 4,700 by 2012. An additional 600 dealerships could be eliminated by 2014.

In December GM asked the federal government for $18 billion to help make the company viable again. It is now adjusting that number, requesting an additional $7.5 billion worth of government aid and a $4.5 billion US secured revolver credit facility. Repayment of the $30 billion worth of loans would begin in 2012, according to current plans.

"The U.S. and global auto industries are facing times of unprecedented challenge," says GM chairman and CEO Rick Wagoner, in a release. "These conditions dictate that we must take very tough actions to accelerate GM's restructuring efforts. The plan we delivered today to the US Treasury is aggressive but achievable. It provides a clear pathway for GM that continues to support American manufacturing and technology innovation, which are vital to the future of our nation's economy."

Chrysler has plans to eliminate an additional 3,000 jobs. At the end of 2008, Chrysler had already reduced its workforce by 37%, for a total of 32,000 layoffs. The company will also discontinue three vehicle models. For its part, Chrysler has requested an additional $2 billion government loan, on top of it’s original $7 billion request. The company is still working with Italy’s Fiat to bring the Italian automaker into the mix as a strategic alliance partner. The non-binding agreement gives Fiat a 33% control of the company, with the possibility of taking 55% control down the road.

“We believe the requested working capital loan is the least-costly alternative and will help provide an important stimulus to the U.S. economy and deliver positive results for American taxpayers,” Chrysler officials said in a statement. “This plan will ensure the continued provision of health care and pension benefits to our active employees and retirees, while continuing to protect hundreds of thousands of middle class, quality American jobs at Chrysler, our dealer network and our suppliers."